Tech Stocks’ Latest Rally Could Have Legs. What History Shows.

If diversification is the key to long-term investing success, then tech stocks’ latest rebound offers hope that the sector’s 2023 rally hasn’t run out of steam yet.

However that winners’ circle began to expand as the year went on, a pattern that has reasserted itself after tech’s brief selloff in August. The sector’s latest rebound has been founded on broad-based gains, with a majority of tech stocks advancing from their August lows, rather than just a few heavyweights.

As the firm notes, more than two-thirds of tech stocks have advanced from their selloff in just 10 days. In the past five years, a sentiment reversal that fast has happened only twice before after the sector had gone more than six months without a similar thrust—a technical indicator of stock momentum. In October 2022 and February 2018, both of those signals preceded sustained gains, particularly over the following three- and six-month periods.

Of course, some investors might still feel nervous, given that tech is near-a multiyear high, and that the quick move up for the sector could herald a blow-off—a technical term for when a chart goes up sharply only to then fall into a similarly sharp decline.

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